Location - Where to buy your Investment Property?

Study up on where to buy your Property

When it comes time to choose where you will buy your investment property (or any property for that matter), make sure you do your research.

There are a number of different things you need to take into account in regards to location when purchasing an investment property.  To do this effectively, you need to do a drive by of the property in the morning, afternoon, and in the evening to see what the traffic is like and what parking is available.  Get out of the car and walk around the street and side streets to get a good feel of the area and the people who live there.  When it comes time to buy an investment property there is simply no substitute for a sound knowledge of the locality.  This is important because not all real estate nightmares come from rising damp, termites or rotting stumps. 

If you are serious about finding a property that you are happy with, take the time to do your pre-purchase research but not just on local sales and property values.  Look beyond the property and it’s garden.

Location, Location, Location

Location or position is a very important part of selecting which investment property to buy. If you are after capital growth, it is recommended that you purchase properties within close proximity to the CBD. For example properties with 2km to 12km of the larger cities like Melbourne and Sydney or 1km to 5km from the smaller cities like Hobart.

If you are more interested in cash flow, then purchasing property further out from the main cities or focusing on large regional centres should do the trick.

No matter which area you choose, there are some common factors to look out for.
Choose property that blends in with the surrounding houses and streetscape. Check that the local amenities are easily accessible and appropriate for your target rental market and future owner-occupiers.

Purchase residential property in areas with good access to schools, shopping centres, transport, culture, restaurants, parks and recreational opportunities. If you are considering purchasing flats or apartments, consider those that are close to cafés and restaurant strips.

Avoid purchasing on a main road as the value of your property is unlikely to increase at the same rate as a similar property in a nearby side street. In general tenants dislike properties that are on busy roads, next to schools, near to industrial parks, close to public toilets, below mobile phone towers, beneath flight paths, next to or across from large sporting facilities or ovals, in front of a bus stop or with larger buildings on either side.

Buy the worst property in the best street rather than the best property in the worst street.

The reason that location is so important is that once you’ve purchased a property, you can’t move it. With a physical structure, you could always tear it down and start again, however you can never change the location. It is this inflexibility that makes location so important to get right.

Information in regards to property prices in all regions of Australia can be found in the Australian Property Investor Magazine each month.

While location is an important factor in determining which investment property to buy, it is the overall performance of your investment property that is more important.

Rural vs. Urban Real Estate Investing

As population shifts occur throughout the world, many individuals and families are finding it possible and desirable to move from urban areas to rural, seaside, mountain, and even island locations. In that fact lays a new opportunity for property investment.

Farms, horse ranches, Bed and Breakfasts, mountain and lake estates, even vineyards are increasing in value in the U.S., UK, France, Spain, Hungary, Australia and other countries. These old properties represent a chance to profit from demographic changes that include an aging and increasingly affluent baby boomer population and the worldwide political changes of the last few decades.

But before you rush off to plunk down a few thousand dollars on a rural type property, consider some of the differences entailed in non-urban investments.

Rural, mountain and island areas have much more concern for and pay more regular attention to environmental issues. Even though in many countries regulations are more relaxed, the local citizens tend to take more personal responsibility for ensuring clean water, adherence to fishing and hunting regulations and proper recreational vehicle use. So, when it comes time to sell a property in these areas, potential buyers are going to be looking more closely in many cases.

In some countries and specific areas the population is growing due to an influx of retirees and baby boomers. Other factors including the increasing use of the Internet to run home based businesses also affect property decisions. In other areas, populations are declining

Also, as non-urban demographics fluctuate it can require greater advertising over a wider area and take longer to build a large number of qualified and interested buyers. Properties in areas of smaller population means fewer local buyers, but you can compensate by using the Internet to advertise to a larger area and attract those that are looking to relocate or purchase an investment property or holiday house.

It can also take longer to find desirable properties to buy at potentially profitable prices. In areas where property values are rising rapidly, high demand snaps up good properties quickly. That leaves only those that are more difficult to evaluate as investments.

Non-urban properties are inherently more difficult to evaluate, since they're often unique and there are few similar properties to compare their value. Most new estates are easier to evaluate. Developers keep costs low by reusing the same plan and building on similar, small blocks of land. But farms, ranches, mountain homes, lake homes and island property are all different not only from one region to the next, but within the same locale. A large mountain cabin on a lake is very unlike a horse property a mile down the road.

Comparisons for such properties can only be guessed at and lenders know this, making financing more difficult. Most non-urban financiers have learned to take such factors into account, but they often require more solid credit and larger down payments as a result and can lend less than the normal 80% value.

And if you plan to buy, fix-up and sell you need to take into account the potentially greater difficulty of finding qualified, reliable contractors and labour. Labour prices in such markets may surprise you; it's not the case that lower average wages in such areas translates to cheaper labour. Such specialized skills often command a greater price and involve longer time frames for getting work completed.

Just to make things more complicated, there are often different regulations for rural areas, and they vary of course from country to country and State to State.

But despite all the potential hurdles, property values continue to rise as a consequence of urban flight, going on now for decades, along with increasing technology enabling new forms of business and employment in non-urban areas.

Now maybe a good time to start looking if you want a sea change, tree change or a new investment property.